Monsanto Earnings Beat Estimates With Scotts DealJack Kaskey
Monsanto Co., the U.S. seed producer trying to acquire Swiss pesticide maker Syngenta AG, posted fiscal third-quarter earnings that topped analysts’ estimates after it received a herbicide licensing payment.
Net income rose to $2.39 a share in the three months through May 30, compared with $1.62 a year earlier, St. Louis-based Monsanto said Wednesday in a statement, beating the $2.06 average of 20 estimates compiled by Bloomberg.
A licensing payment from lawn-care company Scotts Miracle-Gro Co. to market Monsanto’s Roundup weedkiller added $274 million of gross earnings.
That helped to make up for falling herbicide prices, the effects of a stronger dollar and lower grain prices. Monsanto, which kept operating costs almost unchanged, said it plans to cut expenses by as much as 5 percent this fiscal year and by as much as $500 million by fiscal 2017.
“The gross profit contribution from the expanded Scott’s Roundup license offsets much of the increased headwinds in the base business,” Don Carson, a New York-based analyst Susquehanna Financial Group LLLP who recommends buying the shares, said in a note Monday.
Monsanto halted its share-buyback program as it pursues an acquisition of Syngenta in what would be the industry’s biggest deal. Syngenta rejected Monsanto’s initial $45 billion offer as inadequate.
“Our proposal to combine with Syngenta is an exciting logical next step for our business,” Chairman and Chief Executive Officer Hugh Grant said in the statement.
Monsanto fell 1.6 percent to $110.95 at 9:34 a.m. in New York.
Third-quarter sales climbed to $4.58 billion from $4.25 billion, trailing the $4.63 billion average estimate. Corn and soybean prices have fallen in the past year as global crop output heads for a record. Soybeans, used in cooking oil and livestock feed, lost 22 percent while corn dropped 16 percent, curbing farmers’ spending power.
Monsanto reiterated its forecast for full-year earnings at the low end of $5.75 to $6 a share, before one-time items.
The company said Wednesday it plans to spend more than $1 billion over the next three to five years for production of dicamba weedkiller at its plant in Luling, Louisiana. Monsanto expects to begin selling crop seeds genetically engineered to tolerate both Roundup and dicamba next year to help farmers control weeds no longer killed by Roundup alone.
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